(Reuters) - The U.S. Justice Department and a coalition of state attorneys general on Tuesday will begin a blockbuster antitrust trial in Washington, alleging that Alphabet (GOOGL.O) Google unlawfully abused its dominance in the search engine market to maintain its monopoly power.
Here is an explainer on the key issues in the case.
WHAT IS THE GOVERNMENT'S LEGAL THEORY?
The U.S. and its state allies contend Google unlawfully stifled competition by paying billions of dollars to Apple (AAPL.O) and other business partners to ensure its search engine would be the default on most phones and web browsers.
The government's lawsuit, filed in 2020 in federal court, alleges these deals were intended by Google to be "exclusionary," denying rivals access to search queries and clicks and allowing Google to entrench its market dominance.
Google has grabbed a 90% market share in search in the U.S. in recent years, according to government estimates. The government said the browser agreements — steering billions of web queries to Google every day — have resulted in less choice for consumers and less innovation.
WHAT DOES GOOGLE SAY IN ITS DEFENSE?
Google sees things much differently. The company, which maintains that it did not violate antitrust law, said in a January court filing that its browser agreements were "legitimate competition" and not "illicit exclusion."
The agreements did not prevent rivals from developing their own search engines or stop companies such as Apple and Mozilla from promoting them, Google argues.
Rather, the makers of phones and web browsers set Google search as their default because they wanted to deliver the "highest quality" experience for their customers, Google claimed in its January filing.
Google also claims mobile users can switch easily if they want to use another search engine.
WHAT DOES THE LAW SAY?
It's generally not illegal for a business to make an arrangement with one customer that excludes others. Such exclusive deals indeed are common, and they don't garner much regulatory scrutiny when a company lacking market power can't meaningfully affect competition.
But exclusive deals can violate antitrust law if a company is so big or powerful that it prevents rivals from entering the market, and can't prove that its curbs on industry competition are outweighed by a positive effect on consumers.
The Justice Department has the burden to show that Google's business deals harmed competition for search. Google will have its own chance at the non-jury trial, after the government makes its case, to argue its deals benefit consumers.
WHAT HAPPENS IF GOOGLE LOSES?
The U.S. and state allies are not seeking a monetary penalty, but rather an injunction barring Google from continuing the alleged anticompetitive practices.
Such an order could have significant business implications for Google. For example, the government said in its lawsuit that the court could break up the company as a fix.
More broadly, the Justice Department may argue that it wants to stop Google from leveraging its alleged search monopoly to make exclusive deals in newly emerging markets, including artificial intelligence.
The case is widely seen as one of the biggest challenges to tech industry power since the DOJ sued Microsoft in 1998 over its market dominance for personal computers. The trial court in that case found Microsoft unlawfully tried to block rival browser Netscape Navigator. Microsoft later reached a settlement that left the company intact.
The Google trial at the U.S. District Court for the District of Columbia is expected to last about 10 weeks. The judge would not be expected to rule until sometime in 2024.
WHO IS PRESIDING OVER THE CASE?
U.S. District Judge Amit Mehta was appointed to the bench in 2014 by then-President Barack Obama after a career as a private lawyer in Washington.
He has overseen several major antitrust disputes. In 2015, Mehta blocked Sysco Corp's $3.5 billion merger with U.S. Foods.
Mehta recently presided over the trial of Peter Navarro, the former Donald Trump adviser who was convicted on Sept. 7 of contempt of Congress. Mehta in May sentenced Oath Keepers founder Stewart Rhodes to 18 years in prison for his role in the Jan. 6, 2021, assault on the U.S. Capitol.
- DuckDuckGo, which has long complained that Google's tactics have made it too tough to get people to use their search engine on a mobile phone, will be one of many rivals to the online search giant eyeing a once-in-a-generation antitrust trial set to begin Tuesday.
The United States will argue Google didn't play by the rules in its efforts to dominate online search in a trial seen as a battle for the soul of the Internet.
The U.S. Justice Department is expected to detail how Google paid billions of dollars annually to device makers like Apple Inc. (AAPL.O), wireless companies like AT&T (T.N), and browser makers like Mozilla to keep Google's search engine atop the leaderboard.
DuckDuckGo has also complained, for example, that removing Google as the default search engine on a device and replacing it with DuckDuckGo takes too many steps, helping keep them to a measly 2.3% market share.
DuckDuckGo, Microsoft (MSFT.O), and Yahoo are among a long list of Google competitors who will be watching the trial closely.
"Google makes it unduly difficult to use DuckDuckGo by default. We're glad this issue is finally going to have its day in court," said DuckDuckGo spokesman Kamyl Bazbaz who said that Google had a "stranglehold on major distribution points for more than a decade."
Google has denied wrongdoing and is prepared to vigorously defend itself.
The legal fight has huge implications for Big Tech, which has been accused of buying or strangling small competitors but has insulated itself against many accusations of breaking antitrust law because the services the companies provide to users are free, as in the case of Alphabet's Google (GOOGL.O) and Facebook (META.O), or low price, as in the case of Amazon.com (AMZN.O).
“It would be difficult to overstate the importance of this case, particularly for monopolies and companies with significant market share,” antitrust lawyer Luke Hasskamp told Reuters.
“This will be a major case, particularly for the major tech companies of the world (Google, Apple, Twitter, and others), which have grown to have an outsized role in nearly all our lives,” he added.
Previous antitrust trials of similar importance include Microsoft, filed in 1998, and AT&T, filed in 1974. The AT&T breakup in 1982 is credited with paving the way for the modern cell phone industry while the fight with Microsoft is credited with opening space for Google and others on the internet.
Congress tried to rein in Big Tech last year but largely missed. It considered bills to check the market power of the companies, like legislation to prevent them from preferencing their own products, but failed to pass the most aggressive of them.
Big Tech's rivals now pin their hope on Judge Amit Mehta, who was nominated by former President Barack Obama to the U.S. District Court for the District of Columbia.
The lawsuit that goes to trial was brought by former President Donald Trump's Justice Department. In a rare show of bipartisan agreement, President Joe Biden's Justice Department has pressed on with the lawsuit and filed a second one against Google in January focused on advertising technology. read more
Judge Mehta will decide if Google has broken antitrust law in this first trial, and, if so, what should be done. The government has asked the judge to order Google to stop any illegal activity but also urged "structural relief as needed," raising the possibility that the tech giant could be ordered broken up.
The government's strongest arguments are those against Google's revenue sharing agreements with Android makers, which require Google to be the only search on the smartphone in exchange for a percentage of search advertising revenue, said Daniel McCuaig, a partner at Cohen Milstein who was formerly with the U.S. Justice Department's Antitrust Division.
A Louisiana judge's order sharply limiting U.S. officials' contacts with social media companies could soon take full effect despite being partly overturned by an appeals court, thanks to a legal loophole, President Joe Biden's administration said on Monday.
In a court filing, the Justice Department asked the 5th U.S. Circuit Court of Appeals for a new ruling to prevent the "improper result" of allowing parts of the lower court order "to regain effect even after having been held invalid by this court."
The filing came in an ongoing lawsuit brought by the Republican attorneys general of Missouri and Louisiana and several individuals. The plaintiffs allege that U.S. officials lobby social media platforms to suppress what the government considers to be misinformation, violating users' right to free speech under the U.S. Constitution's First Amendment. The case focuses on posts about the COVID-19 pandemic and claims of fraud in the 2020 election won by Biden, a Democrat.
The offices of the Missouri and Louisiana Attorneys General did not immediately respond to requests for comment.
U.S. District Judge Terry Doughty in Monroe, Louisiana in July found that federal officials had violated the First Amendment by effectively coercing companies, including Meta Platforms Inc's (META.O) Facebook, Alphabet Inc's (GOOGL.O) YouTube and X Corp, formerly Twitter, into censoring posts through frequent private demands and public threats of regulatory enforcement.
While the case was still at an early stage, Doughty issued a preliminary injunction banning a wide range of communications between a slew of officials and social media companies.
A three-judge panel of the 5th Circuit on Friday agreed with Doughty that officials had violated the First Amendment, but found his injunction "overbroad."
The panel limited the injunction's reach to a smaller group of officials, including White House staff, the Centers for Disease Control and Prevention, and the Federal Bureau of Investigation. It also specified it had to be communications that intended to "coerce or significantly encourage" companies to suppress speech protected by the First Amendment.
The panel also put all the restrictions on hold for 10 days, to give the administration time to appeal to the U.S. Supreme Court.
However, the administration said in Monday's filing that Doughty's entire order, including the parts that were overruled, will take effect when that 10-day period lapses because the 5th Circuit's order will not become final under normal court procedure until Oct. 31.
It said that the 5th Circuit should either put the parts of Doughty's order that it reversed on hold or finalize its order immediately.